Among the targets for reform in his plan unveiled today: credit default swaps and other types of derivatives that have been blamed for exacerbating the economy's troubles. And hedge funds, which have become important market players in the last few years, would now be required to register with the Securities and Exchange Commission.

"The system proved too unstable and fragile, subject to significant crises every few years, periodic booms in real estate markets and in credit, followed by busts and contraction," he said. "Innovation and complexity overwhelmed the checks and balances in the system. Compensation practices rewarded short-term profits over long-term return."

To fix the system, Geithner said the government can't just make "modest repairs at the margin," but must write "new rules of the game."

"We can't allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints," he said.

There was a push from some Geithner and some members of the committee to act now, while the economy was suffering and there is public support for reform.

"Too big to fail is the right size to regulate," said Rep. Al Green, D-Texas. "It is time for us to act."

"When we have this opportunity to make a difference there will be naysayers. We need naysayers … but we cannot allow the naysayers from allowing us to do what we know is the right thing for the American people," Green added. "Mr. Secretary I salute you for what you are doing. God bless you."

Geithner thanked him for the comments and then reiterated: "We have an opportunity now and we need to act."